Feature: Surviving The Dotcom Bomb

This time last year everyone was certain that the advertising and sponsorship on the internet to justify the huge spending of the dotcom boom companies was just around the corner. One year on and the corner has yet to be turned. Figures from NetValue claim that a third of UK homes now have internet access, but marketers are yet to be convinced that this translates into a valuable channel for their messages.

The IPA’s Bellwether report for the first quarter of this year revealed that, at 6.3%, the average increase to internet marketing budgets this quarter is the lowest since the survey began. The proportion of companies not allocating any of their budget to internet marketing rose, from 24% in Q4 200 to 30% in Q1 2001.

Uncertainty about the medium has had a knock-on effect for companies which invested in web activities during the boom. Research by management consultants McKinsey and Company revealed that two out of three magazine publishers missed targets for online profits last year. Considerable downsizing has resulted with Emap, for example, slashing its three year, £250 million budget by more than half.

Future Network, whose website-heavy portfolio brought its share price to over £9 in the spring of 2000, has since been laid low. Many ventures, including both the print and online versions of Business 2.0 have been discontinued, while the company’s share price now languishes below £1.

Surviving the dotcom fallout is a possibility. The rise in budget may have been low this quarter, but the internet sector was the only one to see any upward adjustment and the proportion of companies spending more than 20% of their budget on internet marketing has grown from 1.7% in Q4 2000 to 2.5%. Furthermore, McKinsey suggests that if the editorial and advertising operations of print and online publications are integrated, financial sustainability is a possibility.

Another factor which may prove crucial is the effective tracking of internet traffic. So far the industry has failed to establish whether any one of the confusing array of hit rates, page impressions, unique visitors, click throughs and so on is the definitive way to measure a site or ad’s efficacy. Internet monitoring services ABCe and the Interactive Advertising Bureau are gathering credibility, while Emap and Chrysalis are spearheading a drive to create an internet advertising body which may yet find a standard measurement to convince the marketers.